There are just so many heaps of ironies and stupidities about the Trump Tariff Tantrum, but none more so than the fact that Lesotho, the 22nd poorest country in the world, is the joint-hardest-hit by the new tariff regime.
But that is not all. The reason US President Donald Trump has imposed 50% tariffs on products from Lesotho is essentially a consequence of the formula the US administration has used to calculate the tariffs which, rigidly applied, creates these weird anomalies.
This is particularly so if the country is small and poor, as Lesotho is. Therefore, its proportional tariffs end up being enormous despite its exports in absolute terms being minuscule. Additionally, if you happen to be a small, poor country, you are, generally speaking, importing very little because the goods are broadly unaffordable. Lesotho’s trade surplus is less than a percentage point compared with the Chinese trade surplus with the US.
But Lesotho happens to have a small textile industry established precisely to take advantage of the US Africa Growth and Opportunities Act that encouraged them to do so. And, irony on top of tragedy, one of the things the Lesotho textile industry has done in the past is produce Trump-branded golf gear.
The “Trump Golf” branded shirt used by Trump at his many courses (co-branded by Greg Norman) is made in Lesotho – and it says so on the label.
The ‘Trump Golf’ branded shirt used by Trump at his many courses (co-branded by Greg Norman) is made in Lesotho – and it says so on the label. (Photo: Supplied)
Trump, ever delicate, said in his speech to Congress last month that Lesotho was a country “nobody has ever heard of”, even though the US actually has an embassy there. He was defending cuts to foreign aid, specifically referencing an $8-million allocation aimed at promoting LGBTQI+ rights in Lesotho.
But after this week, as many have quipped, the Basotho might prefer that he really had never heard of them. Lesotho exports about $270-million in goods to the US, which is a huge chunk of its GDP, making the country’s politicians worry about factory closures and job losses.
And to keep on the ironic theme, guess who gets away from the Trump Tariff Tantrum pretty lightly, considering? Actually, as it happens, South Africa. It seems as though metals that the US does not produce are likely to be exempt. So although, technically speaking, the tariffs against SA will be 30%, according to the new scheme, platinum, titanium and some other metals seem likely to be excluded.
Trade & Industrial Policy Strategies (Tips), an independent, non-profit, economic research group, has produced a fact sheet on the announcement, and it calculates that if you factor that into the equation, US demand for minerals accounts for most of South Africa’s deficit with the US.
“If the raw materials exempted from the new tariffs are excluded from South African trade with the US, its surplus with the US would shrink by a third. That means the USTR (US Trade Representative) formula would suggest a tariff of around 20%”.
Although, technically speaking, the tariffs against SA are going to be 30%, according to the new scheme, platinum, titanium and some other metals seem likely to be excluded.
The effective 20% tariff would mean SA’s tariffs would be equal to those imposed on Europe – heavy but less drastic than they seem at first. And there is yet more irony: that certain metals are excluded means SA’s ability to retaliate (unlikely as that may be) is effectively curtailed.
Tips also makes the point that a 30% US tariff on South African exports to the US makes no economic sense.
“Far from being reciprocal, it is six times as high as the weighted average tariff that South Africa imposes on US imports”. The calculations also simply ignore services, looking only at trade in goods. “South Africa has a deficit on services trade with the US. If services were included in the USTR formula, the tariff on South Africa would come to 21%,” Tips calculates.
We have always known that from an economic and legal perspective, these tariffs are crazy. We didn’t know they would be stupid too. But they are. DM
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